March 18, 2021 – Written by John Cameron
Pound New Zealand Dollar Exchange Rate Rises as BoE Holds Interest Rates
The Pound New Zealand Dollar (GBP/NZD) exchange rate rose by 0.4% today after the Bank of England (BoE) left interest rates on hold. The pairing is currently fluctuating around NZ$ 1.93.
The BoE’s minutes were notably bullish, pointing out encouraging signs of recovery in the British economy. The minutes said:
‘Since the MPC’s previous meeting, the news on near-term economic activity had been positive, although the extent to which that news changed the medium-term outlook was less clear.’
The Bank also said that the extension of the UK Furlough scheme until the end of September means that unemployment would likely rise less than previously forecast.
Consequently, the Pound New Zealand Dollar (GBP/NZD) exchange rate rose as the outlook for the UK’s economy remains largely positive.
Explaining the interest rate decision, the BoE said:
‘The rates of Covid infections and hospitalisations have fallen markedly across the United Kingdom and the vaccination programme is proceeding at a rapid pace. Plans for the easing of restrictions on activity have been announced and envisage that restrictions could be lifted somewhat more rapidly than was assumed in the February Report.’
The BoE also held interest rates at 0.1% as largely expected, but the positive tone in the minutes following the rate decision has buoyed confidence in the economy in the months ahead.
New Zealand Dollar (NZD) Falls as NZ GDP Shrinks
The New Zealand Dollar (NZD) suffered today following a surprise slump in New Zealand’s latest GDP figures.
Diana Mousina, the senior economist at AMP Capital Investors, Sydney, commented:
‘There will still be bumps in the recovery as long as you continue to have Covid-19 out there. We have to wait probably another year until the vaccine is rolled out to stop seeing some of this up-and-down or zig-zag movement.’
As a result, NZD investors are becoming more worried about the outlook for New Zealand’s economy, with growth undershooting forecasts at the beginning of this year.
Added to this, the US Federal Reserve’s cautious monetary policy statement yesterday, has left some investors more cautious about investing in risky assets like the ‘Kiwi’.
Pound (GBP) investors will be awaiting tomorrow’s release of March’s UK GfK Consumer Confidence data.
Any improvement in consumer morale this month could further drive-up the GBP/NZD exchange rate.
Global risk sentiment will continue to drive the NZD/GBP exchange rate, however, so any improvement in the global economic situation would boost the risk-sensitive ‘Kiwi’.
The Pound to New Zealand dollar exchange rate could continue to rise this week, with the outlook for the UK economy likely to remain largely positive following the BoE’s upbeat minutes.
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TAGS: New Zealand Dollar Forecasts Pound New Zealand Dollar Forecasts